Analysts expect fair growth for the economy to continue through 2017, even as the window closes for fiscal stimulus, according to Fannie Mae’s Economic & Strategic Research (ESR) Group’s recently released Economic and Housing Outlook for June 2017. The Outlook projects the economy will grow 2.0 percent over the course of the year—making for nine years of improvement—and 2.9 percent in the second quarter.
“This month marks the eighth anniversary of the U.S. economic expansion, the third-longest of the post-World War II era,” says Doug Duncan, chief economist at Fannie Mae. “While we expect modest growth to continue in 2018, the potential for fiscal stimulus remains a notable wild card. The odds that Congress will enact major pieces of legislation this year and jumpstart meaningful fiscal stimulus have diminished, and the economy also faces another fiscal policy uncertainty in coming months, as Congress will have to raise the debt ceiling to avoid a government shutdown. Monetary policy uncertainty also has heightened.”
Another key interest rate hike, which affects housing sentiment, could happen in September, according to the Outlook.
“As we expected, the Federal Open Market Committee raised the fed funds rate at the June meeting by 25 basis points,” Duncan says. “Our June forecast assumes that the Fed will increase the target rate once more this year in September and will begin to taper reinvestment of principal payments from its securities holdings in December. However, the recent slowdowns in hiring and inflation could lead the Fed to hold off on the September rate hike in order to gather more data.
The Outlook projects home sales, total, to leap 3.2 percent in 2017, but single-family mortgage originations to plunge 21 percent.
“The narrative for the housing market hasn’t changed over the past year,” says Duncan. “A labor shortage continues to restrain home-building, and tight inventory is constraining sales and boosting home prices. Although we expect mortgage rates to remain supportive for homebuyers, our near-term outlook for existing-home sales remains cautious.”
Source: Fannie Mae
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